Tuesday, November 30

The Fed rekindles the inflation debate

Investors will focus their attention today on the publication of the minutes of the last meeting of the us Fed, which was held on November 3.

The appointment was key given that the central bank unanimously agreed to begin the withdrawal of stimuli launched with the arrival of the coronavirus.

The reduction was set at a rate of $ 15 billion a month. The Fed’s bond purchases amount to $ 120 billion each month.

How was the tapering activation

The document that will be released today is not only important because it will give details of how the meeting took place in which it was decided to activate the tapering, but because it will provide information on the position of the members of the Fed Open Markets Committee on other relevant issues, such as inflation and wage increases.

It will be interesting to know the tone of the inflation debate and what the central bankers proposed, now that Biden has decided that the Fed Chairman Jerome Powell serve a second term at the head of the institution.

It will be Powell, therefore, who will have to deal with what, so far, is an unstoppable rise in prices.

Avoid endemic inflation

Therefore, as soon as the nomination is known, Secretary of State for the Treasury, Janet Yellen, stated that Powell had an important long-term role ahead of him in ensuring inflation does not become “endemic.”

Inflation is the main concern at the moment, with the permission of the pandemic, despite the fact that the Fed president has insisted on its transitory nature and that he would be patient in deciding when to raise interest rates.

But now, with re-election, the market expects a more aggressive Powell in its pulse with inflation, to the point that a survey of investors on monetary policy on Monday calculated a 100 percent probability that the Fed will execute in July of 2022 the first rate hike since the pandemic began.

Risks to the upside in Europe

In Europe, the president of the ECB, Christine Lagarde, has been blunt in recent weeks about its refusal to raise rates next year.

But it seems that his diagnosis may vary based on the statements of other members of the ECB board. It is the case of the German Isabel Schnabel, which in an interview said that “the risks for inflation are biased upward.”

Schnabel confirmed that inflation in the euro zone will be higher in 2022 than previously thought and there is a clear risk that, in the medium term, price growth will remain above the ECB’s target.


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